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17 Cards in this Set
- Front
- Back
What happens when a price ceiling is below the equilibrium price, and why?
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When a price ceiling is below the equilibrium price it creates shortages and drives up opportunity costs because less efficient mechanisms prevail when the market cannot adjust. Requires 1) growing enforcement bureacracy, 2) stimulates costly lobbying for "exceptions", 3) creates immense pressures for corruption of officials in charge of enforcement, 4) thwarts expansion of output that would normally follow higher prices, 5) generates black markets because demand exceeds supply
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Changes in quantity demanded are caused by...
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changes in supply
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Changes in quantity supplied are caused by...
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changes in demand
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arbitrage
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risklessly buying at a low price in one market and then selling at a higher price in another market
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price controls
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government imposed price ceilings or price floors that hinder the market's ability to ration goods efficiently
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externalities
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benefits or costs of an activity spill over to 3rd parties
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A ticket scalper is an example of a...
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speculator
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public goods
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can be enjoyed by many people simultaneously, but restricting access is prohibitively expensive
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price floor
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minimum legal price. causes a surplus
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price ceiling
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maximum legal price. causes a shortage
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Reliability
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Findings can be replicated
(intrinsic properties of Screening Test ; reliability and validity) |
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Adam Smith's name for automatic market adjustments:
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invisible hand
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floors that cause the unskilled to be unemployed
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minimum wage laws
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transaction costs
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emerge because information and mobility are costly
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If demands increase while supplies decline, prices ________ but quantity changes are ________.
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rise; indeterminate
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When there are increases in both demands and supplies, _________ will increase but the change in _________ is indeterminate.
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quantity; price
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The economic functions of government include:
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providing a reasonably certain legal, social, and business environment for stable growth; promoting and maintaining competitive markets; providing public goods and adjusting for externalities; stabilizing income, employment, and the price level
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